Tuesday, February 21, 2012

'Unfair' cudgels are out as another Zioconned CIA stooge Romney, lays ground for China trade war....

By Nick Ottens

United States President Barack Obama and his likely Republican challenger Mitt Romney both accused China of "unfair trade practices" last week.

The president has staked his re-election on a campaign of economic nationalism, promising, in his yearly address to congress in January, to raise taxes on businesses that ship "jobs and profits overseas" and fiscally reward companies that create jobs in America.

The Republican, himself a former businessman, should be more in favor of trade than the incumbent yet he promised in a Wall Street Journal op-ed that, if elected, he would not continue "an economic relationship that rewards China's cheating and penalizes American companies and workers".

Both politicians say that China doesn't play by the "rules". Obama wants to incentivize domestic manufacturing with tax credits and erect a trade enforcement agency to crack down on China's stealing of copyrights. Romney intends to designate China a currency manipulator "and take appropriate counteraction".

Neither wants to start a trade war, they say, but both either have implemented or would implement policies that mimic Chinese protectionism.

Under Obama's watch, the American central bank has printed several trillions of dollars to boost liquidity in financial markets. The dollar has lost its value as a result, reducing the cost of American exports. Yet the Americans lambast China for keeping its currency, and therefore exports, underpriced, even if the value of the yuan has appreciated by more than 50% compared with the dollar since 2005. President Obama nonetheless insists that the Chinese currency is "undervalued" and should be "increasingly driven by the market".

Because China is so dependent on exports, it cannot afford to let its currency appreciate at a steeper pace and hurt its manufacturers. Premier Wen Jiabao acknowledged last year that China's economic development "still lacks balance, coordination and sustainability". A sudden increase in the yuan's value would bring "disaster" to China, he warned. "Factories will shut down and society will be in turmoil."

It's not an exaggeration. Relatively small price changes could convince companies to move production elsewhere while China has hundreds of millions of people still living in poverty who want factory jobs.

Also under Obama's watch, indeed, his personal direction, the United States government bailed out ailing automakers, banks and insurance companies which it deemed "too big to fail". Yet it criticizes China for seeking to create "national champions" in particular industries with public financial support. Granted, the Chinese method is permanent but the outcome is the same - protected industries that have an unfair advantage over their foreign competitors.

Obama and Romney both lament China's inadequate legal protection of international investment and complain that it shields entire sectors of its economy from foreign enterprise. The Chinese legal system is unable to guarantee the sanctity of contracts while regulations can be arbitrarily enforced and subject to political interference but both countries deter foreign investment with legal restrictions and superfluous red tape.

Obama and Romney like to talk of creating a "level playing field", but just as China prohibits investment in critical industries, the United States does not allow foreign sales of high technology and weapons so China must do business with Europe and Russia.

Little wonder than Vice President Xi Jinping, Hu Jintao's likely successor, told the Chamber of Commerce in Washington DC last week that America should be "lifting restrictions on high-tech exports to China and providing a level playing field for Chinese firms investing in America" as well.

It seems the leaders of both nations want the same but the measures they propose to enact would not accomplish a freer business climate. To the contrary, Obama would penalize American companies that collaborate in Chinese attempts to "steal" their jobs and Romney vows to punish China for "cheating" the system.

Both urge China to "play by the rules". China is left wondering why it should abide by rules it had no part in writing - rules that only seem to apply, moreover, when American interests are threatened.....

Romney lays ground for China trade war....By Benjamin A Shobert

An ominous note of desperation is in the air over the campaign by Mitt Romney to secure the Republican nomination for the US presidential election to be held later this year. The seemingly obvious, establishment-ordained, safe-bet candidacy of Romney no longer seems to be the sure thing.

The longer the GOP primary drags on, the more the "anyone but Romney" candidates erode the ability of the former governor of Massachusetts to walk the fine line between firing up the Republican base without seeming too outlandish to appeal to the undecided American voter.

Consequently, it is worth noting those rare occasions where the Romney campaign feels it needs to make a splash, as these tend to be issues they believe will translate both during the GOP primary as well as the general election. With this in mind, it is interesting to consider Romney's op-ed in last week's Wall Street Journal titled "How I'll Respond to China's Rising Power."

Part of what Romney wrote aligns with his early September 2011 economic plan, where he announced that his administration would formally label China a "currency manipulator". On this point, his Wall Street Journal op-ed doubled down; there, he wrote, " ... on day one of my presidency I will designate it a currency manipulator and take appropriate counteraction."

As a head nod to the influential parts of the GOP who represent the interests of big-business, he subsequently added, "A trade war with China is the last thing I want, but I cannot tolerate our current trade surrender."

For someone who claims not to want a trade war with China, Romney is making a pretty compelling case for how his administration would make one all but certain.

It is a temptation to read Romney's op-ed as the sort of positioning during the primaries that Americans have come to expect during their elections. Even in the US-China policy-community, many draw comfort from past election cycles where blustery comments from potential presidential candidates were dramatically toned down - if they did not go away altogether - once their transition into elected office took place. The present administration went through a similar smoothing out of the rough edges about its stance towards China once it emerged victoriously from both the primary and the general election.

Admittedly, this is the safest way to interpret Romney's most recent volley towards the Chinese: as the primary shifts back to his "home state", China presents an issue that certainly has bi-partisan traction in a manufacturing-sensitive midwestern economy like Michigan, where China's economy is perceived to have benefited at the expense of middle-class American blue-collar workers.

It is a note the Romney campaign believes can be safely struck not only in the midst of a heated GOP primary, but in the general election as well. Tradition says nothing should be made of Romney's saber rattling towards China, but is tradition wrong?

Choosing to interpret Romney's attitude towards China as something not to be alarmed about overlooks a major difference between past election cycles and today's: now the American psyche is deeply frustrated over the difficulties the country's economy must face.

In the past, the relative confidence felt about America's economic future allowed many to overlook the potential threat China might present. Today, that confidence is gone. The average American worker remains traumatized and deeply insecure since the 2008 financial crisis. Many also feel brutalized over the ugly state of American politics, precisely when the latter should be shedding light on how best to deal with the former. An economic crisis has quickly devolved into a political one, leaving many in middle America eager for someone to blame.

Tied to these economic insecurities are deep misgivings about America's place in the world, which go back to the US response to 9/11 and the subsequent invasions of Afghanistan and Iraq. Americans are torn between the GOP world view that argues for America to remain a hegemonic force for good around the world, versus a libertarian-progressive framework that believes that America can be powerful and influential, but must do so within a the realities of both a multi-polar world and the economic limitations imposed on Washington based on years of fiscal imprudence.

When Romney disparagingly writes of President Barack Obama that he "came into office as a near supplicant to Beijing", he touches on this insecurity and appeals to the American desire to appear muscular and able to "go it alone" where others counsel caution and compromise.

The popular temper American politicians tap into over China is not necessarily new, although a good argument could be made that negative portrayals of China during American elections has been growing more common in this, and recent election cycles. Conventional thinking has it that the real decision-makers about American policy towards China are those who never run for elected office, the safe wise men who, behind closed doors, know how to calm everyone down and focus on how best to maintain the status-quo.

That is precisely why Romney's ongoing diatribe against China is so distressing: he is supposed to be one of those calm, level-headed people that could be trusted not to demagogue China in order to score cheap political points.

For US-China policy-makers, Romney's elevation of China as an issue for the general election should not be overlooked, downplayed, or rationalized. To have the supposedly most business-savvy candidate for president the country has seen in years run within the most pro-business, historically free trade American political party with a major plank of his economic plan being to call out China as a currency manipulator is noteworthy.

But it would be a mistake only to point out Romney's fixation on how China has negatively hurt the American economy: after all, of the 17 paragraphs that constitute Romney's editorial, only two of them have to do with matters related to the two countries' economies. The other 15 all focus on Romney's assertion that China is not a trustworthy partner for America, and that the Beijing model represents, as he writes, "a widespread and disquieting norm" that must be challenged by a change in American policy towards China.

If there is a common thread that ties together Romney's heavy-handed editorial about China it is this: the American and Chinese attitudes about freedom and fairness are not shared values, and because they are not shared values nor is it likely they will become shared anytime soon, the policy of engagement towards China that stressed overlooking these differences has served its purpose and must be discarded.

Yes, as Romney sees it, the cause for doing so will initially be realizations forced upon Americans as a result of the 2008 financial crisis; but, if Romney is correct, 2008 simply brought into focus something America had been willing to overlook when times were good: specifically, that the United States was doing business with a repressive government that had no aspirations of ever changing. It wanted commerce, not democracy.

Throughout his piece, Romney repeatedly points towards the "suppression of political and personal freedom", takes issue with the Obama administration having "demurred from raising issues of human rights" with the Chinese government, to what is perhaps both his most direct and confusing statement: towards the end of his op-ed, Romney writes of China, "A nation that represses its own people cannot ultimately be a trusted partner in an international system based on economic and political freedom."

As a portrayal of the tension that has existed in China relative to its reform process for the last 30 years, this is an obvious frustration. Where Romney fails is in how to respond to China's shortcomings.

He makes little attempt to answer the question; rather, he simply makes note of the fact that "While it is obvious that any lasting democratic reform in China cannot be imposed from the outside, it is equally obvious that the Chinese people currently do not yet enjoy the requisite civil and political rights to turn internal dissent into effective reform."

Romney seems to believe China would reform more quickly if only America spent more on its military, took a more confrontational position up in the Asia Pacific region towards China, and called Beijing out on its unfair trade practices.

Long-time China policy hands might chuckle at this sort of brutishness, but to do so is a mistake given these policy proposals are all coming from the most sane, pro-business candidate still viable in the GOP primary. If one of the last bulwarks that has separated mob rule towards Beijing has been the stoic Republican Party's view of China, then Romney's fixation on the country as a threat to the American economy and ideals the country holds dear is worth noting.

Of all of Romney's statements, the most dangerous may be the false choice he offers the American people: that China's rise is somehow incompatible with America's ongoing safety and economic stability.

Romney begins his op-ed by asking the question, "Should the 21st century be an American century?", as if the only two choices were between an American and Chinese century. This is dangerous and highly reductionist thinking, and its impact ranges from how Romney would have American economic policy towards China change, to more fundamental questions of whether the United States should further increase military spending in order to deal with China as a potential regional threat.

As he frames it, this also leaves little oxygen in the room for other countries - both developed and emerging - who feel they have something of note to offer the 21st century. Romney's words need to be properly called what they are: irresponsible fear mongering. The path towards war has been paved by comments just like these in times past, in moments of historical insecurity just like those his desired-presidency would encounter.

Romney wants the reader to believe that, as he writes, "The sum total of my approach will ensure that this is an American, not a Chinese century".

What is the key to making sure this happens? According to Romney, it is making sure that China is not a "prosperous tyranny" that can "pose problems for us, for its neighbors, and for the entire world". Absent throughout Romney's op-ed is any reference to what China is doing better than America, where China's single-minded focus on economic growth forces politics to take a second chair to questions of how best to align national industrial policy with limited resources, or what role government should play in helping American entrepreneurs compete with China's growing bio-tech and green technology industries.

Rather, Romney wants to cast China in the role of villain, a role the country easily fits within the American imagination, and one American politics seems bent on making a reality....